I had to drop off the emergency Gillmor Gang last night before I had a chance to give my thoughts on the Microsoft / Yahoo deal. Not only did Steve call an emergency Gang, but it looks like the blogosphere did as well. Anyway, here is what I think:
All bad for Yahoo
- Yahoo fought the deal, lost a bunch of key employees, increased “golden parachutes” for employees, etc. While Yahoo didn’t ask for a takeover bid, it was pretty clear Ballmer was going to go after Yahoo again. Jerry Yang should have been ready, but wasn’t. His response was to take measures which make it harder for the company to do business as an independent.
- Yahoo’s stock price is about to plummet. My guess is well below its price before this all started.
- And, investor lawsuits.
Mixed for Microsoft
- Ballmer spent a lot of time and money on this and came up short. Unless he had the secondary goal of sabotaging Yahoo this was just a waste of time and money. Clearly he thought he could get it done, but he didn’t, and he failed there.
- Merging the companies together would have been very difficult culturally — and I think a long hard slog for everybody involved. Good thing this is avoided.
- Microsoft still needs to jumpstart their advertising revenues. It really isn’t clear how they do this. Live Mesh is a longer term play for building a stick and highly compelling services platform. This will convert to ad revenue, but not very quickly.
The real issue for Microsoft is how to convert the (still strong) Office / Windows revenues into a sustainable and growing advertising platform.
What I think Microsoft needs to do now:
- Robert Scoble says that Live is a damaged brand. Building cool services won’t fix this on its own. Microsoft needs to fix this by defining Live in a way that is clear. Live can’t be all things to all people! Define it.
- Windows Vista is a damaged brand. While this is slightly off the topic of a services platform, it is dead center on the Microsoft definition of S+S. They need to fix this. The whole “Vista Ready” fiasco really informs what Microsoft did wrong here. Number one priority for Microsoft on Vista should be to make it as performant and stable as XP.
- Wait. Keep building out their very cool services and dev platform. Get a Silverlight Office out. Keep an eye on Yahoo. Maybe after Yahoo gets hammered, the economics will make sense.
Microsoft clearly has had a two-pronged strategy here: build and buy. Buy is out for now — as it isn’t clear what other acquisitions get Microsoft what they need — but build is going like crazy. The problem with build alone is that it only works accompanied with brand. So I think the real question is:
How will Microsoft fix their brand woes?